Emini buy climax is testing 2800 triple top
I will update again at the end of the day.
Pre-Open market analysis
This is the start of the 9th week in a strong bull trend. But, 9 consecutive bull bars on the weekly chart is rare. Therefore, either this week or next week will probably have a bear body. Furthermore, there is a parabolic wedge rally on the daily chart. That will probably lead to at least a 2 week pullback.
Because the momentum up is strong, the bulls keep buying. They are trying to break above the October-November-December triple top. With last week closing on its high, this week might gap up. If so, the bulls will try to keep the gap open and continue the rally to above the top.
A pullback has been likely, but it has not yet begun. Therefore, if there is a break above the triple top, it could be big. If there are too many institutions betting on the pullback, they might buy back their shorts in a panic if the bulls get their breakout.
Overnight Emini Globex trading
The Emini is down 8 points in the Globex session. There is a parabolic wedge top on the daily chart. It increases the odds of a 2 – 3 week selloff. This is especially true with the buy climax on the weekly chart.
However, Friday was a bull day closing on its high. Typically a chart has to stop going up before reversing down. Therefore, today will probably not be a big bear day.
In addition, the past 3 days were mostly sideways on the 5 minute chart. The strong bull trend on the daily chart is losing momentum now that it is near last year’s triple top. As a result, a strong bull day is also unlikely. That makes another mostly sideways day likely.
Because the momentum up is strong and the daily chart is at resistance, there is a small, but real chance of a series of big bull days. Likewise, the buy climax at resistance increases the chance of a dramatic selloff for several weeks.
Neither is likely. But, if either becomes clear, traders should not be in denial. There is the potential for a surprisingly big move up or down within a couple weeks.
EURUSD Forex micro wedge bottom
The EURUSD daily Forex chart formed a 4 day micro wedge bottom. Yesterday was a bull bar and therefore the 1st leg up. A micro wedge typically leads to at least 2 legs up. Therefore, today or tomorrow will probably form a higher low.
Yesterday was also a sell signal bar for a double top bear flag with Thursday’s high. Since yesterday had a bull body, this is a low probability sell signal. As a result, there will likely be more buyers than sellers below yesterday’s low. That is consistent with the micro wedge, which will probably to lead to a small 2nd leg up.
While the month-long selloff has been strong and it fell below the December low, it is still a leg in the 4 month range. There have been many strong legs up and down. Each reversed. That is always what is most likely in a trading range. Consequently, the odds are that this one will as well.
However, every trading range over the past 2 years broke out after about 2 months. Therefore, the odds are increasing that one of the legs will lead to a successful breakout. But, until there is a breakout, there is no breakout. The math is still better to bet on a reversal back up to the middle of the range.
Overnight EURUSD Forex trading
The EURUSD 5 minute Forex chart fell below yesterday’s low overnight. As was likely, the bulls bought the breakout since the sell setup on the daily chart was bad. Yesterday’s low might be important all day. The bears want today to close below yesterday’s low while the bulls want it to close above.
While the over night range was 50 pips, the range over the past 3 hours has only been 25 pips. In addition, most of the bars are only about 5 – 7 pips tall. That means that the chart lacks energy. Traders believe that the price is just about right. Day traders are scalping. This is consistent with the chart being in a tight trading range for 6 days.
Because the chart is at the bottom of a 4 day range, there is a slightly increased chance of a big bear breakout or big reversal up. But, until there is a clear breakout, day traders will continue to scalp.
Summary of today’s S&P Emini futures price action and what to expect tomorrow
End of day summary
The Emini began with a Bull Trend From The Open. After a midday trading range, the bull trend resumed and closed near its high.
By today closing above its open, this week so far is the 9th consecutive bull trend bar on the weekly chart. There has only been one longer streak in the 20 year history of the Emini. Consequently, the odds favor a 2 – 3 week pullback beginning this week.
But, the momentum up is strong. Most importantly, the triple top above 2800 is a strong magnet. The bulls have failed many times over the past year to break strongly above 2800. While they will probably succeed at some point this year, the buy climax makes a 2 – 3 week pullback likely to come before the breakout.
Since the pullback will probably begin this week or next, traders will be looking for a reversal on the daily chart. However, many institutions are probably betting on the pullback. Therefore, there is a chance of a strong break above 2800. Those institutions will cover their shorts, and other institutions will buy the breakout, looking for a test of the all-time high.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
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Charts use Pacific Standard Time
When I mention time, it is USA Pacific Standard Time (the Emini day session opens at 6:30 am PST, and closes at 1:15 pm PST). You can read background information on the intraday market reports on the Intraday Market Update page.